Feds shut down Megaupload.com file-sharing website (Update)

Jan 19, 2012 By MATTHEW BARAKAT , Associated Press

This undated image obtained by The Associated Press shows the homepage of the website Megaupload.com. Federal prosecutors in Virginia have shut down one of the world's largest file-sharing sites, Megaupload.com, and charged its founder and others with violating piracy laws. (AP Photo)

One of the world's largest file-sharing sites was shut down Thursday, and its founder and several company executives were charged with violating piracy laws, federal prosecutors said.

With 150 million registered users, about 50 million hits daily and endorsements from music superstars, Megaupload.com was among the world's biggest file-sharing sites. Big enough, according to a U.S. indictment, that it earned founder Kim Dotcom $42 million last year alone.

The movie industry howled that the site was making money off pirated material. Though the company is based in Hong Kong and Dotcom was living in New Zealand, some of the alleged pirated content was hosted on leased servers in Virginia, and that was enough for U.S. prosecutors to act.

The site was shut down Thursday, and Dotcom and three Megaupload employees were arrested in New Zealand on U.S. accusations that they facilitated millions of illegal downloads of films, music and other content, costing copyright holders at least $500 million in lost revenue.

New Zealand Police also seized guns, artwork, more than $8 million in cash and luxury cars valued at nearly $5 million after serving 10 search warrants at several businesses and homes around the city of Auckland.

News of the shutdown seemed to bring retaliation from hackers who claimed credit for attacking the Justice Department's website. Federal officials confirmed it was down for hours Thursday evening and that the disruption was being "treated as a malicious act."

A loose affiliation of hackers known as "Anonymous" claimed credit for the attack. Also hacked was the site for the Motion Picture Association of America.

On Friday, New Zealand's Fairfax Media reported that the four defendants stood together in an Auckland courtroom in the first step of extradition proceedings that could last a year or more.

Dotcom's lawyer raised objections to a media request to take photographs and video, but then Dotcom spoke out from the dock, saying he didn't mind photos or video "because we have nothing to hide." The judge granted the media access, and ruled that the four would remain in custody until a second hearing Monday.

Dotcom, Megaupload's former CEO and current chief innovation officer, is a resident of Hong Kong and New Zealand and a dual citizen of Finland and Germany who had his name legally changed. The 37-year-old was previously known as Kim Schmitz and Kim Tim Jim Vestor.

Two other German citizens and one Dutch citizen also were arrested and three other defendants - another German, a Slovakian and an Estonian - remain at large.

The Electronic Frontier Foundation, which defends free speech and digital rights online, said in a statement that the arrests set "a terrifying precedent. If the United States can seize a Dutch citizen in New Zealand over a copyright claim, what is next?"

Megaupload.com employees Bram van der Kolk, also known as Bramos, left, Finn Batato,second from left, Mathias Ortmann and founder, former CEO and current chief innovation officer of Megaupload.com Kim Dotcom (also known as Kim Schmitz and Kim Tim Jim Vestor), right, appear in North Shore District Court in Auckland, New Zealand, Friday, Jan. 20, 2012. The four appeared in court in relation to arrests made to Megaupload.com, which is linked to a U.S. investigation into international copyright infringement and money laundering. (AP Photo/Greg Bowker, New Zealand Herald) NEW ZEALAND OUT, AUSTRALIA OUT

The indictment was unsealed one day after websites including Wikipedia and Craigslist shut down in protest of two congressional proposals intended to make it easier for authorities to go after sites with pirated material, especially those with overseas headquarters and servers.

Before Megaupload was taken down, the company posted a statement saying allegations that it facilitated massive breaches of copyright laws were "grotesquely overblown."

"The fact is that the vast majority of Mega's Internet traffic is legitimate, and we are here to stay. If the content industry would like to take advantage of our popularity, we are happy to enter into a dialogue. We have some good ideas. Please get in touch," the statement said.

Several sister sites were also shut down, including one dedicated to sharing pornography files.

The $8 million in cash seized had been invested in various New Zealand financial institutions, and has been placed in a trust pending the outcome of the cases.

Police spokesman Grant Ogilvie said the seized cars include a Rolls Royce Phantom Drophead Coupe worth more than $400,000. Two short-barreled shotguns and a number of valuable artworks were also confiscated, he added.

According to the indictment, Megaupload was estimated at one point to be the 13th most frequently visited website on the Internet. Current estimates by companies that monitor Web traffic place it in the top 100.

Megaupload is considered a "cyberlocker," in which users can upload and transfer files that are too large to send by email. Such sites can have perfectly legitimate uses. But the Motion Picture Association of America, which has campaigned for a crackdown on piracy, estimated that the vast majority of content being shared on Megaupload was in violation of copyright laws.

The website allowed users to download some content for free, but made money by charging subscriptions to people who wanted access to faster download speeds or extra content. The website also sold advertising.

Megaupload was unique not only because of its massive size and the volume of downloaded content, but also because it had high-profile support from celebrities, musicians and other content producers who are most often the victims of copyright infringement and piracy. Before the website was taken down, it contained endorsements from Kim Kardashian, Alicia Keys and Kanye West, among others.

The company listed Swizz Beatz, a musician who married Keys in 2010, as its CEO. He was not named in the indictment and declined to comment through a representative.

The five-count indictment, which alleges copyright infringement as well as conspiracy to commit money laundering and racketeering, described a site designed specifically to reward users who uploaded pirated content for sharing, and turned a blind eye to requests from copyright holders to remove copyright-protected files.

For instance, users received cash bonuses if they uploaded content popular enough to generate massive numbers of downloads, according to the indictment. Such content was almost always copyright protected, the indictment said.

The Justice Department said it was illegal for anyone to download pirated content, but their investigation focused on the leaders of the company, not end users who may have downloaded a few movies for personal viewing.

A lawyer who represented the company in a lawsuit last year declined to comment Thursday. Efforts to reach an attorney representing Dotcom were unsuccessful.

Although Megaupload is based in Hong Kong, the size of its operation in the southern Chinese city was unclear. The administrative contact listed in its domain registration, Bonnie Lam, did not respond immediately for a request for comment sent to a fax number and email address listed.

The indictment was returned in the Eastern District of Virginia, which claimed jurisdiction in part because some of the alleged pirated materials were hosted on leased servers in Ashburn, Virginia. Prosecutors there have pursued multiple piracy investigations.

The Justice Department also was investigating the "significant increase in activity" that disrupted its website. It said in a statement that it was working to "investigate the origins of this activity, which is being treated as a malicious act until we can fully identify the root cause."

The site appeared to be working again late Thursday. A spokesman for the Motion Picture Association of America said in an emailed statement that the group's site also had been hacked, but it too appeared to be working later in the evening.

"The motion picture and television industry has always been a strong supporter of free speech," the spokesman said. "We strongly condemn any attempts to silence any groups or individuals."

Four Americans and a Greek national have been indicted on conspiracy and copyright infringement charges for alleged involvement with a website, NinjaVideo, which offered illegal downloads of movies and television ...

Wikipedia will black out the English language version of its website Wednesday to protest anti-piracy legislation under consideration in Congress, the foundation behind the popular community-based online encyclopedia ...

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MegaUpload is just an annonymous repositry box. It doesn't index its files for all and sundry, you upload a file, it gives you an address you can give to others to download your file. Basically it's a free way of passing files to others - an essential element of the free exchange of information.

Is a bank responsible for the contents of deposit boxes?

This is a war of vested interests against the freedom of the internet. Nothing has stopped the movie industry capitalising on the internet but its own corporate dogmas and Luddite attitude to progress...

For pity's sake - we NEED to be able to freely exchange files, just about any form of fruitful online collaboration becomes impossible otherwise.

..and the claim every movie download is a lost cinema ticket is just absurd... most UK cinemas have long since been demolished or sold off as bingo halls anyway. How can they get away with such distortions?

When they shut down the fileservers, they can penalize the Internet providers, which are enabling the file sharing, the telecommunication companies providing wires and the plants providing electricity at the very end. All the subjects are participating on physical file sharing more, than the file servers itself.

The tragic irony in all this is that US industry should be spearheading the attack when it's the US we have to thank for the freedom of the net in the first place.. America, uphold your greatest democracy, the greatest in history...!

That is what they are telling us, what gives them juristiction to take down MU, SOPA would fit in the descriptions.

Who would really notice SOPA getting added in the pile of laws besides lawyers? It wouldnt even be called "SOPA" maybe a different name..

IF SOPA really passed it would be foolish of the government to admit it if we look at the protests.

The tragic irony in all this is that US industry should be spearheading the attack when it's the US we have to thank for the freedom of the net in the first place.. America, uphold your greatest democracy, the greatest in history...!

Uhhh... america has the worst democracy ever, ever heard of countries in europe?

How these tools think 500 million was lost in revenue? If it's not there, and they don't have the money, those people don't get it at all. period. And, later down the road, when they do have enough to get it, but don't know about it, cause it wasn't there to begin with, then they don't spend it on more.

Don't worry. if you didn't understand it, go back to drinking the kool aid.

By the way gents ( as ladies seem to aboid comments) a new networking toolkit coming out will allow any device to talk with any other. Right now if you make two devices communicate you lock out everything else. Now everything can talk to everything. US government and MAFIAA have no say and no central point of failure to attack. Hackers: 1. Stormtroopers: zero.

tyranny at it's finest, and yet the sheeple do nothing, no action to safeguard liberty nor freedom. Stop behaving like slaves and lead the charge against this or you will all be on your knees someday soon for this new world order heralded by rompouy, george bush sr, soros, etc. I am definitely not liking what I see of this new order how about you does it seem like a good idea to live as slaves under tyranny?

If the anti-piracy bills pass I vow to never go to another movie, or buy another DVD or CD of any kind, ever! America is a police state and our leaders need to be ousted completely. Nothing will ever change if we keep electing Republicans and Democrats. We need, at least, a third party that understands and cares about people and not corporations (no matter what the supreme court says, corporations are not people).

If they were smart, they would go after the users sharing illegal content rather than punishing the whole.

I think some of you may not be familiar with the particulars of this case?http://en.wikiped..._SchmitzMr schmitz/dotcom/vestor is not such a nice mensch

http://en.wikiped...gal_caseClever yes but prone to megalomania and criminality a little perhaps? Were his sites only spectacularly successful fronts for organized racketeering and theft to the tune of $500M? Bernie Madoff is chuckling at this moment-

-Users were in many cases only paying schmitz money which should rightfully have gone to the copyright owners. Lost income from sales and advertising of the legitimate industries which produced the content, COST jobs. It removed money from our economy and sent it to mr schmitz and company. Schmitz owns the most expensive house in NZ.

"The Electronic Frontier Foundation, which defends free speech and digital rights online, said in a statement that the arrests set "a terrifying precedent. If the United States can seize a Dutch citizen in New Zealand over a copyright claim, what is next?"

He didn't steal anything. He provided software for *users to share with. He made his money the legal way: he got paid by advertisers and by users. That isn't theft.

You didnt read the indictment (see the above link I posted).

If youll note in item #4, their income derived mainly from premium subscriptions and advertizing. This money was generated primarily from traffic of pirated material. They aided and abetted the pirating by rewarding incentives and by inducing premium memberships as the only way of viewing a complete movie. They did many other bad and criminal things as well.

If you offered to pay me to shove somebody else into a volcano I just might consider it. Especially if he was a big stinking fatcat music industry exec yes? You would be guilty of a crime whether I did it or not.

But I wouldnt do such a thing. That would be wrong. And Ive never not paid for music as that would be dangerous.

If youll note in item #4, their income derived mainly from premium subscriptions and advertizing. This money was generated primarily from traffic of pirated material.

No it was not, the money came from people willingly subscribing to their service, which provided them storage space on their servers to store their files. The files that any customer chose to store is THE CUSTOMERS business, and the CUSTOMER should be liable.

They aided and abetted...

This is bullshit. They didn't cater to any specific file type. They didn't care what types of files their users were storing. I don't think you are familiar with the service but I used the service quite a bit. The company provided hard drive space for users to store files. That is all. OF COURSE they rewarded people who uploaded frequently accessed files because that drove ad revenue. There is nothing wrong with that it is a standard business practice.

Listen Otto, if I own a storage company with hundreds of garage type storage lockers (those exist all over where I live, I don't know about you) I am NOT legally liable for the contents of any particular storage unit. The person who is currently renting the storage unit is legally liable for it's contents.

How the fuck is this any different than renting storage space on a web server? Why the hell should the company be liable for the content the users chose to store on their rented hard drive space?

It's fucking insanity, it is the government being in the pockets of the giant media companies. It is corruption of the highest order and it is going to destroy everything this country stands for if we keep letting them get away with it.

It's not so much that I think he is innocent or guilty of "knowing" something... it's that it doesn't matter. Again I go to the example of the storage lockers. Just because I know that someone has weed in the storage locker I am renting to them does not mean I should go to jail... I know under current law it would but I am opposed to the current law. I have done NOTHING wrong, my knowledge should not be able to be used against me. I provided a perfectly benign service and one of my customers CHOSE to commit a crime that just HAPPENS to involve my perfectly benign service. The customer should be liable as the one that broke the law, I should not be liable just because I happened to get tangled up in it.

I am NOT legally liable for the contents of any particular storage unit. The person who is currently renting the storage unit is legally liable for it's contents.

The cops used to regularly sweep the storage place I used to use. If a storage place was encouraging the storage of stolen goods and generating increased income as a result, the DA might have reason to indict them. Yes? They could plead ignorance in court but if the DA could prove that they had conversations with criminals to encourage them to use their site, and even gave them discounts for high volume for instance, then he might have a case.

READ THE INDICTMENT. They apparently knew very well what they were doing - generating huge uncome from illegal content. Of course they are innocent until proven to be stinking lowlife thugs in a court of law.

The cops used to regularly sweep the storage place I used to use. If a storage place was encouraging the storage of stolen goods and generating increased income as a result, the DA might have reason to indict them. Yes?

The person in possession of the illegal material should be the ONLY one legally liable for that material.

Even if uncle vinny doesnt know whats in there, if he sees me driving a new caddy and carting stuff into and out of his garage all the time, the cops are gonna want to nab vinny as an accessory. Vinnys not stoopid ya know. So maybe he charges me a fortune to rent his truck and we call it even, eh goombats? Say hi to ya mother for me willya?

Jeezus. The point is they're biting themselves in the butt. They're exposing their own inadequacies by engaging in the interception of capitalistic crimes (I mean those involving capital gain/loss).

You're economically shi* because of your stupid patent laws you idiots. Open up the f***ing laws and allow for manufacture without infrigment so all humans can profit from development. Just because something is based upon existing systems does not automatically make it inferior. In fact it is superior. It is 0.0001 percent of people sharing with 1 percent of people paying 99% of people with barely enough to survive to develop their patented technology while they reap the rewards like the life reapers they are. Horrible economical structure. One that is leading into exactly what is happening. Unless the economical structure is revised internal turmoil will ensue. The country will economically eat itself from the inside. The gluttonous pig ruptures his stomac. The pig dies.

This way, full operation can be established while the intelligent property is protected. After 5 years patents are open for rebasis. This will increase physical quality through a more competitive open market.